Question

Peter wants to sell one of his cars that has a diesel motor to his nephew Brett. Brett is eager to purchase the car but Brett does not realise that one of his uncle’s cars is diesel.

Peter writes a letter to Brett as follows:

         “Dear Brett,

I know that you are interested in buying one of my cars. I would like to give it to you but I know that you won’t accept charity. Therefore I will offer it to you for $500 (I reckon it is worth about $2,000). If I don’t hear from you by this Friday I take it that you are happy to buy it for $500. I will then drop off the car to your place on the weekend.”

Regards,

         Peter”

Brett does not see the letter and there is no further communication between Peter and Brett.

On Saturday, Peter delivers the diesel motor car to Brett’s home. Brett arrives home to discover the letter and the car from his uncle. Brett realises the car is diesel and he does not really want the car. However, Brett decides the car is still useful and starts driving the car to and from university. After three weeks driving the car Brett decides that he will return the car. He has not yet paid Peter any money. Peter thinks Brett is ungrateful and demands full payment.

Brett wants to return the motor car to his uncle. Peter is angry with his nephew and he demands payment for the car. Peter says he will lodge a small claim and sue Brett for the money. Brett states “we are family and you can’t sue me.”

Explain whether the uncle/nephew relationship has any effect on whether or not there is a binding agreement.   6 marks)

  

On the same telephone call Brett also says to Peter that “There is no contract because I never agreed to anything. Peter says “It’s a bit late to return the car now. You’ve been driving it around”.

Has Brett accepted an offer from Peter to purchase the motor car?

On the same telephone call Peter says that “I was being nice to you and offering you the car at ‘mates rates’.

Could $500 be valid ‘consideration’ for a contract to sell the diesel motor car? Explain why/why not?      

  

Brett tells Peter on the same telephone call “Even if you can convince the judge that there was an agreement, I can get out of it because I didn’t know you had a diesel car and I never wanted a diesel car. I thought all your cars were petrol”. Is it correct that Brett can avoid contractual obligations on the basis of his mistaken belief? Why/why not?

Answer 1

Explain whether the uncle/nephew relationship has any effect on whether or not there is a binding agreement.

There is no binding agreement in this case. One of the main aspects of a valid contract is both the parties in a contract should have an "intention to create legal relation". In this case, Peter and Brett didn't have an intention to create legal relation when they entered into the agreement. A contract is an agreement enforceable by law. A valid contract involves a valid agreement and enforceability. A valid agreement should be bound by the intention to create legal relation. In this case, parties are family and they didn't have an intention to create legal relation.

Has Brett accepted an offer from Peter to purchase the motor car?

Yes, the offer is accepted since Brett has been using the Car. One of the elements of a valid contract is an offer made by one party and accepted the same by the other party. In this case, an offer made by one party and not accepted by the other party in writing or expressed his consent but one party has been using the consideration of a contract without expressing his interest. This can be considered as implied acceptance of the offer given by the other party.

Could $500 be valid ‘consideration’ for a contract to sell the diesel motor car? Explain why/why not?

Five hundred dollars is a valid consideration. Consideration is the price agreed to pay by one party for a promise made by the other party. The price must be something of value, although it need not be money. So long as consideration exists and is of real value, a court will not question its adequacy. In this case, the promise to pay 500$ amount of money in return for the diesel motor car could be a good consideration.

Is it correct that Brett can avoid contractual obligations on the basis of his mistaken belief?

No, Brett cannot avoid his contract obligation. A contract is valid only if all conditions in a contract expressed and understood by each party in the same manner. "consensus ad idem" which is nothing but mutual assent and mutual agreement of the terms in the contract, but Brett should have expressed his dissent when he realized it's not petrol car instead of using the car. Brett didn't express his dissent and used the consideration from the other party anyway, so he has to perform his obligation to pay the price for the car.